Reminder To Investors: Africa Is 54 Different Countries

Optimism among investors was not at its highest point for Africa at the start of 2019, but investors should appreciate that Africa, while interconnected in certain ways, is a continent of 54 unique countries.

Many investors were already spooked as 2018 came to an end amid a global slowdown and rising global interest rates mixed with the renewed volatility in the U.K. and U.S. markets.

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Yet their fears may altogether have been focused on the wrong concerns. In a surprising and frustrating twist, the woes of January and February this year stem from issues and challenges many African cynics would admit were not expected, particularly in such a quick sequence.

Attempted coup in Gabon

In the earlier morning on the Jan. 7, five Gabonese soldiers took control of the national radio station and announced the establishment of a “National Restoration Council”.

A video circulating on social media captures three of the young soldiers in military fatigues and holding guns while passionately appealing to the Gabonese youth, with lieutenant Kelly Ondo Obiang urging the youth to “take charge of their destiny” and follow a new group called the Patriotic Movement of the Defense and Security Forces of Gabon.

The rebels appealed to other soldiers to seize control of the transport system, ammunition reserves, and airports for the sake of the country’s growth and security.

As quick as the news spread across social media and infiltrated international news broadcasts, the Gabon government of President Ali Bongo crushed the coup and announced that it was back in control of the country.

Although the attempted coup was short-lived, its occurrence in this major oil-producer startled many African investors. Capital raises and financing for projects in the country, including for largely stable and secure oil producers, came to a quick halt.

The financing tap is slowly turning back on but the language of caution in public and in contracts is clearly on the rise, according to investors and lawyers operating in the country.

Gabon, with its relative stability—albeit only having had three presidents since 1960—reminded optimistic investors how youth frustration can boil under the surface.

With youth unemployment around 35 percent for a population of nearly 1.8 million people, Gabon is a great example of the unexpected.

Although President Ali Bongo, son of former President Omar Bongo, who ruled for more than four decades, had been out of the country for two months at the time of the coup (reportedly having suffered a stroke and receiving treatment in Morocco), the insurgents knew the generals still supported Bongo and would not easily give way to a younger faction of the military.

Thus we are only left to believe that the rebel military members believed the youth and military anger combined was great enough to topple Bongo. That is a scary thought.

Election confusion in the Democratic Republic of the Congo

The election confusion in the Democratic Republic of Congo that came within a week of the Gabon coup further (rather unfairly) stoked pessimism concerning African democracy.

Most African political analysts believed opposition candidate Felix Tshisekedi was not going to win the DRC presidential election.

Tshisekedi was expected to be more of an observer to the battle between the leading opposition candidate Martin Fayulu, a widely respected businessman and veteran parliamentarian, and Emmanuel Ramazani Shadary, a former interior minister and loyalist of the outgoing President Joseph Kabila.

Yet Tshisekedi became the surprise winner of the presidential election held on Dec. 30 and lead the first electoral transfer of power in 59 years of independence for the DRC.

The first leader to take power by way of the ballot box in the DRC was Patrice Lumumba, who became prime minister shortly after the DRC won its independence from Belgium in 1960 but was then overthrown in a coup and killed four months thereafter.

The path to declaring Tshisekedi as winner involved a couple of weeks of bellicose language from outside parties (including European governments) and public posturing by Fayulu.

To be fair, Tshisekedi’s ability to lead the transition or country was not necessarily at the center of the discussion or confusion.

The results bewildered observers because Fayulu held a rather strong lead in pre-election polling. Senior church officials were very clear that the announced results did not match the data collected by their near 40,000 observers deployed on election day.

Leaked data from the church indicated a Fayulu victory in line with pre-election polls which had him ahead of Tshisekedi by at least 20 percentage points.

Yet official results had Tshisekedi with 38 percent and Fayulu with 34 percent.

Critics argue that Tshisekedi struck a power-sharing deal with Kabila, who knew a Shadary victory would be unbelievable and create unrest.

Kabila had ruled since the 2001 assassination of his father Laurent Kabila (who led the coup against long-serving dictator Mobutu Sese Seko in 1997), with Kabila’s second electoral mandate having expired in 2016.

African, European and American governments jointly employed efforts to ensure the long-delayed election would happen in 2018.

The skepticism that now permeates the Congolese discourse on the election and hampers Tshisekedi’s mandate to lead remains fueled by public appearances of Tshisekedi with Kabila.

What is normal in politics with new leaders engaging old leaders for advice and guidance on leading the country and bridging leadership amid a transition is now viewed as a public display of obtrusive and meddlesome behavior by Kabila.

Such a storyline—ignoring if it is true or not—has many investors and political observers wondering if political or government risk is understated and under-accounted for in African countries (and theoretically their investments).

More than 30 people have been killed and more than 60 have been wounded since the election results were announced, only elevating concern.

Kenyan terrorist attack in January

A terrorist attack at the Dusit II complex in the Westlands area of Nairobi on Jan. 15 January was a reminder that terrorism, while down globally, can unexpectedly rear its ugly head in unexpected places.

Although Kenyans had seen this tragedy before, most notably with the terrorist attack on the Westgate shopping mall in 2013, many Kenyans were optimistic that the country was moving past such grotesque displays of violence, particularly in its capital city.

Yet this East African financial and business hub was shocked into horror when a gang of five men, including one suicide bomber, charged through the Dusit II security and killed 21 individuals.

The U.N. continues to argue that al-Shabaab terrorists find their way across the border from Somalia by bribing Kenya border security agents to not search their cars, and when that is not possible, simply sneaking across the hundreds of miles of unguarded border between Kenya and Somalia.

The most extreme assertions include Kenya border security agents taking simply $20 to turn a blind eye during border checks.

While denying the bribery stories, the Kenyan government does acknowledge that many Somalian terrorists potentially remain in the country and that tracking them is complicated by the large presence of Somalian refugees amongst whom potential terrorists can easily blend.

That reality has disturbed many locals and foreigners in Nairobi because the loss of security in Nairobi (rightly or wrongly) would signal a loss of security in many places in Africa.

The symbolism in the Nairobi tragedy is overstated in that sense, but its ramifications may not be if investors fear that this is not simply a hiccup in the growth story.

One thing is for certain, Kenya will not get the same leeway that France gets; in other words, people were scared to travel to Kenya following the terrorist attack in January while many of those same people would have boarded a flight to France the next day after any of its multiple terrorist attacks.

Internet shutdowns ongoing

When people basically must cross borders to use the internet, you have a problem. In order to suppress protests, the Zimbabwean government has cut access to social media, including WhatsApp and other related messaging services.

When such efforts did not work as expected, Zimbabwean officials shut down the internet. Such tactics notably are not the creation of Zimbabwe but rather an adoption of tactics employed by countries such as China, Russia, and the DRC.

The Congolese government shut down the internet during an alleged attempt by hackers to change election results.

Critics argue that Zimbabwean officials are more liberal in their use, for example, by ordering a shutdown after protests started over a fuel price hike.

Although virtual private networks (VPNs) have been partially successful to stemming the negative effects of no internet for some businesses and individuals, the longer-term effect may be a withdrawing of support from international investors and financiers, as well as foreign governments

Five countries, including the DRC, Gabon, Sudan, and Zimbabwe have experienced partial or full internet shutdowns, according to CNN.

Access Now—an international non-profit dedicated to an open and free internet— says there were more than 185 shutdowns in 2018, up from 108 in 2017.

Social media, including Facebook, WhatsApp and YouTube, to name a few, can be beneficial and challenging all in the same moment for both individuals and governments.

Critics are actively targeting social media providers from both sides with individuals claiming their privacy is exploited by social media companies, and with governments saying social media is the tool most employed to topple their governments or unfairly stir unrest. Neither group is exactly right or wrong.

Individuals should realize that we live and manage so much of our lives online (including with financial accounts), and that privacy was greatly in decline years ago.

Hackers appreciate this more than the individuals whose data they seek access to.

Governments should appreciate that social media can either help or hurt a government based on how it is employed to engage the masses.

Videos of civilians being tear gassed hurts governments, yet it is social media that has propped up political campaigns and support for some leaders.

The reality, in the end, is that internet shutdowns scare local and foreigners alike as the possibility of being thrown back into the pre-internet days is like being removed from civilization.

That feeling can stir more worry and fear than most things for any individual

Nigerian election delay in February

As the worries of 2019 seemed to be slowly dissipating away, the Nigerian election commission shocked the ecosystem by delaying the election by a week only hours before the voters went to the polls on Saturday, Feb. 16.

President Muhammadu Buhari has asked for people to stay calm. But many Nigerians remain disturbed by the timing, with the chairman of Nigeria’s Independent National Electoral Commission (INEC), Mahmood Yakubu, taking heat from local and international parties.

Voting materials and ballots had reportedly not been delivered to all parts of the country by Friday, prompting this decision.

Yakubu and Buhari’s critics are rapidly conjuring up other theories on what is happening behind the scenes.

With a very close race expected between incumbent President Buhari and his main challenger, former Vice President Atiku Abubakar (who is backed by former President Olusegun Obasanjo), some critics worry this will reduce turnout as many Nigerians will struggle to fund travel and/or take the necessary work leave to travel to their home polling stations.

However, it is not clear who this scenario would favor in the election.

The optimist’s view…

The reality of the situation is that Africa is made up of 54 different countries. That fact still shocks some potential investors.

Africa, as a region, remains a major frontier for investment, with an abundance of natural resources, a growing consumer base, and a large human capital base.

History shows us that some countries have thrived while others have struggled and vice versa, depending on the year (i.e., French Africa in recent years compared to Nigeria and South Africa among others).

Some countries benefit from higher oil prices (i.e., Angola and Nigeria) while other nations prefer lower oil prices as a net importer.

In an odd way, to appreciate Africa, investors must unbundle the African continent for the uniqueness of each country while still appreciating the connectivity between countries.

This approach becomes even more important in these times. The challenges of the DRC, Gabon, and Nigeria seem related but, at the end of the day, the politics aren’t tied together.

Hopefully investors will see that disconnection among other things in the early days of 2019.

Kurt Davis Jr. is an investment banker with private equity experience focused on Africa, Middle East, and Turkey. He earned an MBA in finance, entrepreneurship and operations from the University of Chicago and J.D. in tax and commercial law at the University of Virginia’s School of Law. He can be reached at kurt.davis.jr@gmail.com.

About Kurt Davis Jr.

Kurt Davis Jr. is an investment banker with private equity experience focused on Africa and the Middle East. He earned an MBA in finance, entrepreneurship and operations from the University of Chicago and J.D. in tax and commercial law at the University of Virginia’s School of Law. He can be reached at kurt.davis.jr@gmail.com.

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